Medivas, LLC v. Marubeni Corp.

Citation741 F.3d 4
Decision Date27 January 2014
Docket NumberNo. 12–55375.,12–55375.
PartiesMEDIVAS, LLC, a California limited liability company, Plaintiff–Appellant, and Kenneth W. Carpenter; Joseph D. Dowling; T. Knox Bell; Dari Darabbeigi; Lindy Hartig; Sachio Okamura; William Summer; Paul Teirstein; William G. Turnell, individuals, Plaintiffs, v. MARUBENI CORPORATION, a Japanese corporation, Defendant–Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

OPINION TEXT STARTS HERE

Stephen L. Schreiner (argued), Solomon Ward Seidenwurm & Smith, LLP, San Diego, CA, for PlaintiffAppellant.

Jeffry A. Davis (argued) and Nathan R. Hamler, Mintz Levin Cohn Ferris Glovsky and Popeo, San Diego, CA, for DefendantAppellee.

Appeal from the United States District Court for the Southern District of California, Thomas J. Whelan, Senior District Judge, Presiding. D.C. No. 3:10–cv–01001–W–RBB.

Before: ALFRED T. GOODWIN, RAYMOND C. FISHER and RICHARD R. CLIFTON, Circuit Judges.

OPINION

FISHER, Circuit Judge:

We address whether an order compelling arbitration is appealable when the district court neither explicitly dismisses nor explicitly stays the action. We hold that such an order implicitly stays the action and thus is not “a final decision with respect to an arbitration” under the Federal Arbitration Act, 9 U.S.C. § 16(a)(3). We also adopt a rebuttable presumption that an order compelling arbitration but not explicitly dismissing the underlying claims stays the action as to those claims pending the completion of the arbitration. Accordingly, we dismiss this appeal for lack of jurisdiction.

BACKGROUND

MediVas is a small biomedical company based in San Diego, California, that specializes in developing new methods for pharmaceutical drug delivery. Marubeni is a Japanese multinational trading corporation. Between April 2004 and October 2007, Marubeni and MediVas executed various contracts in connection with a $5 million loan from Marubeni to MediVas. One of these contracts required the parties to submit contractual disputes to internationalarbitration in Tokyo, Japan, whereas another designated the courts of San Diego as the exclusive forum for such disputes. The contracts also granted Marubeni a security interest in all of MediVas' assets.

After MediVas defaulted on the loan, Marubeni foreclosed on promissory notes held by MediVas and threatened to foreclose on additional MediVas assets. In response, MediVas and several individual plaintiffs filed suit against Marubeni in San Diego Superior Court, raising numerous state law claims arising out of this series of transactions. Invoking the contractual arbitration clause, Marubeni removed the action to federal court under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, moved to compel arbitration and initiated arbitration against the plaintiffs. See9 U.S.C. §§ 205–06. MediVas opposed arbitration, relying on the forum selection clause, and moved to remand the action to state court.

In an August 2011 order, the district court ruled that many of MediVas' claims against Marubeni were subject to the arbitration clause and ordered arbitration of those claims. Because it concluded that federal jurisdiction rested solely on the New York Convention, the court remanded the remaining claims, including all claims brought by the individual plaintiffs, to state court.1 Neither the August 2011 order nor any other order explicitly stayed or dismissed the arbitrable claims, and no judgment was entered in the action.

The arbitration panel ruled in favor of Marubeni on all claims save one, which the panel concluded fell outside its jurisdiction. Marubeni then filed a second action in district court to confirm the arbitration award, which action was assigned to the same district judge as the original action. In February 2012, a few days after Marubeni filed the final award in the confirmation action, MediVas filed in the original action its notice of appeal from the district court's August 2011 order. Then, also in the original action, Marubeni moved to remand the unarbitrated claim to state court. The district court stayed proceedings in both actions in light of MediVas' pending appeal, which the court believed may have divested it of jurisdiction to proceed.

DISCUSSION
A.

The Federal Arbitration Act permits immediate appeal of “a final decision with respect to an arbitration,” 9 U.S.C. § 16(a)(3), 2 which is a decision that “ends the litigation on the merits and leaves nothing more for the court to do but execute the judgment.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 86, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) (quoting Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 867, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994); Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978)) (internal quotation marks omitted). Thus, an order compelling arbitration may be appealed if the district court dismisses all the underlying claims, but may not be appealed if the court stays the action pending arbitration. See id. at 87 n. 2, 89, 121 S.Ct. 513;Bushley v. Credit Suisse First Bos., 360 F.3d 1149, 1153 n. 1 (9th Cir.2004).

In Green Tree, the district court had ordered the parties to arbitrate their dispute and dismissed the underlying claims with prejudice. See531 U.S. at 83, 86, 121 S.Ct. 513. The Supreme Court acknowledged that the parties could bring a separate proceeding to confirm, vacate or modify any award made in the arbitration, but held that the district court's order was final and appealable because it disposed of the entire action then pending before the district court. See id. at 86–87, 121 S.Ct. 513. Significantly, the Court noted that an appeal would not have been allowed had the district court stayed the action instead of dismissing it. See id. at 87 n. 2, 121 S.Ct. 513 (citing 9 U.S.C. § 16(b)(1)).

In Interactive Flight Technologies, Inc. v. Swissair Swiss Air Transport Co., 249 F.3d 1177 (9th Cir.2001), we extended Green Tree to an order compelling arbitration and dismissing the underlying claims without prejudice. See id. at 1179. Because the district court had dismissed the action without prejudice solely to allow the parties to “bring[ ] a new action after completing arbitration,” we held that the distinction was not sufficient “to show that the dismissal was interlocutory rather than an appealable final decision.” Id.

Since Interactive Flight, we have consistently treated orders compelling arbitration but not explicitly dismissing the underlying claims as unappealable interlocutory orders. In Dees v. Billy, 394 F.3d 1290 (9th Cir.2005), for example, we held that a district court order compelling arbitration, staying the proceedings and administratively closing the case was not final because the plaintiffs claim for relief was still pending before the district court. See id. at 1293–94. Similarly, Sanford v. MemberWorks, Inc., 483 F.3d 956 (9th Cir.2007), held that an order directing arbitration, denying the defendant's motion to stay and stating that the case would be terminated if arbitration was not completed within a year was not final, again because the plaintiff's claims remained before the trial court. See id. at 961–62. Most importantly for this appeal, in Bushley, when the district court ordered several claims to arbitration, dismissed a nonarbitrable claim for failure to state a claim and did not enter judgment or rule on the defendant's motions to stay or dismiss the proceedings, we concluded that the order compelling arbitration was not final because the action was effectively stayed pending the conclusion of the arbitration. See360 F.3d at 1151–53.

We have little trouble concluding that Bushley extends to the facts of this case. In both cases, the district court fully disposed of the nonarbitrable claims but not of the arbitrable claims, which were ordered to arbitration and neither dismissed nor stayed. The claims sent to arbitration therefore remained pending before the district court, albeit subject to an implicit stay pending the outcome of the arbitration. Because those claims were implicitly stayed rather than dismissed, the August 2011 order compelling arbitration did not constitute a “final decision with respect to an arbitration” under section 16(a)(3) of the Federal Arbitration Act. See Green Tree, 531 U.S. at 86–87 & n. 2, 121 S.Ct. 513;Sanford, 483 F.3d at 962;Dees, 394 F.3d at 1294;Bushley, 360 F.3d at 1153;Interactive Flight, 249 F.3d at 1179.

Our conclusion that the proceedings were implicitly stayed pending arbitration is bolstered by the procedural history of this case. The district court's August 2011 order ruled on Marubeni's motion to compel arbitration and stay litigation,” which explicitly requested that the district court stay the proceedings. Because the district court granted the motion as to the claims it decided were arbitrable, the most reasonable inference is that the court intended to stay, not to dismiss, those claims. See McCaskill v. SCI Mgmt. Corp., 298 F.3d 677, 679 (7th Cir.2002) (holding that the district court dismissed the action without prejudice because, among other facts, “the district court granted [the defendant]'s motion which actually requested the court to compel arbitration and dismiss the case). Indeed, in this sense the inference of an implicit stay is stronger here than in Bushley, where the defendant moved to stay proceedings or to dismiss the action.3

The parties' actions also support our conclusion that the August 2011 order implicitly stayed the arbitrated claims. MediVas, which asserts that it “anxiously awaited the first opportunity to appeal” the court's decision, did not file a notice of appeal until after the arbitration had finished and the award had been finalized. Moreover, in its application for leave to file a motion for reconsideration, MediVas requested as an alternative an order certifying an appeal under 28...

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